Excerpt:.....hereinabove, it can well be said that the sale of these emptied containers has a nexus with the business of the assessee and though the purchasing and selling of these emptied containers may not be the business in the ordinary sense the word is understood, by virtue of the enlarged definition of the word 'business',it is included within the ken of the word 'business',as extracted hereinabove. 12. the decision of their lordships of the supreme court in ansari's case air 1976 sc 1813 cannot be pressed into service for the determination of the point in question inasmuch as the point for consideration before their lordships of the supreme court in the above case was not the one or the like one at hand. 12.01. it is true that in ansari's case air 1976 sc 1813 the meaning of the term..........while reiterating the reasons of the tribunal, he submitted that to include the transaction of sale in question within the definition of 'business' as defined under section 2(bb) of the act, it is essential that there should be frequency, continuity and regularity in the sale of the articles in question and if that is not there, the transaction in question cannot be held to have a nexus with the business of the assessee. he relied strongly in support of his argument on a decision of the supreme court in board of revenue v. a.m. ansari air 1976 sc 1813. he further submitted that the decision in ratlam straw-board mills' case 1983 cur tj 78 cannot be relied upon to support the case of the department as it has taken a view without noticing the supreme court's judgment in ansari's case.....

Judgment:ORDER

U.N. Bhachawat, J.

1. This is a reference under Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958 (for short hereinafter referred to as the Act), at the instance of the department, by the Sales Tax Tribunal (the Board of Revenue, Madhya Pradesh, Gwalior) for our decision, the following question :

Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the value of unserviceable goods sold by the dealer for Rs. 5,866 was not liable to tax ?

2. The facts, material for the decision of the case, are these : The assessee deals in manufacture of textile machinery, etc., at Gwalior. The relevant assessment period is from 1st April, 1967, to 31st March, 1968. While making the assessment, the Assistant Commissioner of Sales Tax, Gwalior, vide his order dated 30th April, 1974, included a sum of Rs. 5,866 representing the sales of scrap materials in the gross and taxable turnover of the assessee. Being aggrieved by this, inter alia, other findings of the assessing officer, the assessee filed first appeal before the Appellate Deputy Commissioner of Sales Tax, Gwalior, and vide his order dated 16th February, 1975, he confirmed the finding of the assessing officer that the sum of Rs. 5,866 in question, was exigible to tax. Thereupon, the assessee filed a second appeal before the Tribunal. The Tribunal, vide its order dated 2nd June, 1975, allowing the appeal of the assessee with regard to the point in question, held that the sum of Rs. 5,866 was not exigible to tax. The relevant part of the finding of the Tribunal is contained in paragraph 5 of its order, which reads as under :

Therefore, after 15th April, 1965, a frequent, continuous activity which is large in volume and is undertaken without a motive to make profit may also be business. In State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 STC 426 (SC) the Supreme Court held that in view of the amended definition of the term 'business' in the Madras General Sales Tax Act, 1959, which largely corresponds to the definition inserted in the M. P. General Sales Tax Act on 15th April, 1965, that sale of advertisement materials and scrap and canteen sales were liable to tax as and from the day the term 'business' was defined so as to exclude the profit-motive. The learned counsel for the Commissioner relied upon these circumstances to argue that the sale of unserviceable goods for a value of Rs. 5,866 is liable to tax. Most of the goods sold by the appellant are damaged wooden containers and drums. In the Burmah Shell case the scrap sold were mainly drums. But there is a difference between an oil company selling drums and a firm manufacturing textile machinery selling its damaged containers. The drums are an important item of stock in the case of an oil company but the appellant received the containers when it obtained some stores items necessary for its manufacturing process and some drums containing paints and oil, grease, etc. These cannot be said to be such important items of the stock of the appellant, and the damaged containers were in fact unserviceable scrap for which the appellant had no use. In these circumstances, it must be held that the said sum of Rs. 5,866 is not liable to tax.

3. The department being aggrieved with the order of the Tribunal, made an application under Section 44(1) of the Act, allowing which, the aforesaid question has been referred for decision by this Court.

4. The argument of the learned counsel for the department has been that the sum in question represents the sale price of the containers and drums in which the articles needed in connection with the business of the assessee are received frequently; therefore, the transaction of sale of these containers and drums had a nexus with the business of the assessee and as such, the same is exigible to tax in view of the definition of 'business' given in Section 2(bb) of the Act.

5. The learned counsel for the department relied in support of his argument on a decision of this Court in Commissioner of Sales Tax v. Ratlam Straw-board Mills 1983 Cur TJ 78.

6. The learned counsel for the assessee, in his argument, in counter, supported the view taken by the Tribunal. While reiterating the reasons of the Tribunal, he submitted that to include the transaction of sale in question within the definition of 'business' as defined under Section 2(bb) of the Act, it is essential that there should be frequency, continuity and regularity in the sale of the articles in question and if that is not there, the transaction in question cannot be held to have a nexus with the business of the assessee. He relied strongly in support of his argument on a decision of the Supreme Court in Board of Revenue v. A.M. Ansari AIR 1976 SC 1813. He further submitted that the decision in Ratlam Straw-board Mills' case 1983 Cur TJ 78 cannot be relied upon to support the case of the department as it has taken a view without noticing the Supreme Court's judgment in Ansari's case AIR 1976 SC 1813 and the view taken is contrary to the Supreme Court's judgment in Ansari's case AIR 1976 SC 1813. Pie also relied on a decision of this Court in Commissioner of Sales Tax v. Synthetics Ltd. [1982] 49 STC 22.

7. The decision of the question calls for the interpretation of the term 'business' as defined in Section 2(bb) of the Act. It reads thus :

(bb) 'Business' includes-

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction of sale or purchase of goods in connection with or incidental or ancillary to the trade, commerce, manufacture, adventure or concern referred to in Sub-clause (i), this is to say,--

(a) goods of the description referred to in Sub-section (3) of Section 8 of the Central Sales Tax Act, 1956 (No. 74 of 1956), whether or not they are specified in the certificate of registration, if any, of the dealer under the said Act and whether or not they are in their original form or in the form of second-hand goods, unserviceable goods, obsolete or discarded goods, mere scrap or waste materials; and

(b) goods which are obtained as waste products or by-products in the course of manufacture or processing of other goods or mining or generation of or distribution of electricity or any other form of power.

8. It is an undisputed position that the principal business of the assessee is manufacture of textile machinery, etc. The only point for consideration is whether the sale of articles in question is covered in the definition of 'business' set out hereinabove. The term 'business' is defined to include...which goes to show that the definition is prima, facie extensive. 'The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used those words or phrases must be construed as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include.' (Quoted from Principles of Statutory Interpretation by G. P. Singh, Second Edition, page 108).

9. Section 2(bb)(ii) of the Act extracted hereinabove has made the net of the word 'business' so wide as to include within its ken the transaction of sale or purchase of goods which do not relate to the principal business of the assessee, but which are in connection with or incidental or ancillary to the main business 'and whether or not they are in their original form or in the form of second-hand goods, unserviceable goods, obsolete or discarded goods, mere scrap or waste materials'.

10. A work is ancillary or incidental to a trade or business when it is not necessary thereto or a primary part thereof, e. g., the business of a railway company is primarily that of carriage of passengers or goods, and it is not responsible for a contractor it employs to build, repair and paint its stations, because such work is merely ancillary, or incidental to, and is no part of its business (See Pearce v. London & South Western Railway [1900] 2 QB 100). A work is properly called ancillary to a business where you are describing something auxiliary appurtenant to the purpose for which the business is carried on (See Green v. Britten [1904] 1 KB 356). It would also be pertinent here to refer to a decision in Thurogood v. Bandan [1951] 2 KB 537, wherein it has been held that the testing of machinery used in the manufacture of a product such as margarine is incidental to-the manufacture.

11. The articles in question are the containers of the articles that are received obviously as and when required for the essential purpose of running the business of manufacture of the assessee and these containers, after emptying them, are sold. In this view of the factual position, in the backdrop of the meaning of the words 'ancillary' and 'incidental', discussed hereinabove, it can well be said that the sale of these emptied containers has a nexus with the business of the assessee and though the purchasing and selling of these emptied containers may not be the business in the ordinary sense the word is understood, by virtue of the enlarged definition of the word 'business', it is included within the ken of the word 'business', as extracted hereinabove.

12. The decision of their Lordships of the Supreme Court in Ansari's case AIR 1976 SC 1813 cannot be pressed into service for the determination of the point in question inasmuch as the point for consideration before their Lordships of the Supreme Court in the above case was not the one or the like one at hand. The point for consideration before their Lordships of the Supreme Court in that case was whether the Government of Andhra Pradesh, by holding auction of forest produce annually, can be held to have been carrying on business of selling the forest produce.

12.01. It is true that in Ansari's case AIR 1976 SC 1813 the meaning of the term 'business' was to be determined with reference to the definition of that term as given in Section 2(1)(bbb) of the Andhra Pradesh General Sales Tax Act, 1957 (6 of 1957), which is in pari materia, to the definition of the term 'business' in the Act, but there the point for determination with reference to that definition was about the principal business for being covered within the definition of 'dealer' and not the like one at hand. We will like to quote for a better understanding the definition under the Andhra Pradesh General Sales Tax Act, 1957, of the term 'business' hereinbelow as extracted in Ansari's case AIR 1976 SC 1813 :

'business' includes-

(i) any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; and

(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern.

It was Clause 2(1)(bbb)(ii) of the above definition which was to be construed for the meaning of the word 'business' and it is in that context that their Lordships held :

20. In order that the sales tax should be payable by the respondents in accordance with the obligation imposed on them by Clause (23) of the sale notice, it is necessary that the Government of Andhra Pradesh should have been carrying on the business of selling the forest produce. In State of. Gujarat v. Raipur . AIR 1967 SC 1066 this Court while examining the term 'business' in another context observed that whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. The Court further went on to observe that when a subsidiary product is turned out in the factory of the assessee regularly and continuously and it is being sold from time to time, an intention to carry on business in such product may be reasonably attributed to the assessee. As the consideration of profit-motive cannot be regarded as an essential constituent of the term 'business' in view of the amendment introduced in the definition of the term 'dealer' in 1966, what we are left to consider is whether the other ingredients of the term 'business', viz., volume, frequency, continuity and regularity of transactions of sale and purchase, are satisfied in the instant cases. The auctions of the forest produce by the Government of Andhra Pradesh are admittedly carried on only annually and not at frequent intervals. Thus the important element of frequency being lacking in the instant cases, it cannot be held that the said Government was carrying on the business of sale of forest produce... .

12.02. In the light of what we have said hereinabove, we would reiterate that Ansari's case AIR 1976 SC 1813 cannot be pressed into service for deciding the question at hand and that the decision in Ratlam Strawboard Mills' case 1983 Cur TJ 78 does not run counter to the decision of the Supreme Court in Ansari's case AIR 1976 SC 1813. At this stage, it would be pertinent to extract hereinbelow the relevant excerpt from Ratlam Strawboard Mills' case [1984] 55 STC 194; 1983 Cur TJ 78 :

6. ...definition of business', contained in Section 2(bb) of the Act already stands extracted in para 7 of this order above....

In view of the aforesaid definition, not only profit-motive has ceased to be an ingredient of business but any transaction of sale or purchase of goods in connection with or incidental or ancillary to the main business of the assessee is also covered by the definition. As held by two Division Bench decisions of this Court in Commissioner of Sales Tax, Madhya Pradesh v. Project Automobiles [1978] 42 STC 279 and Commissioner of Sales Tax, M.P. v. Straw Products Ltd., Bhopal [1982] 15 VKN 350 and other decisions referred to by the learned counsel for the assessee have ceased to be applicable and the decisions of the Supreme Court, which are relevant are State of Tamil Nadu v, Burmah Shell Oil Storage and Distributing Co. of India Ltd. [1973] 31 STC 426 (SC) and District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer [1976] 37 STC 423 (SC). In view of the enlarged definition of 'business' under the Act, it is not, in our opinion, necessary for rendering a sale exigible to tax to show that the sale was of a commodity in which the assessee was carrying on business. If the sale is connected with or incidental to or ancillary to the main business of the assessee, then such transaction is 'business' within the definition of that expression in Section 2(bb) of the Act. The decision in Cementation Patel (Durgapur) v. Commissioner of Commercial Taxes, West Bengal [1981] 47 STC 385 is distinguishable on facts. In that case, it has been held that if the main business of a person is such that he cannot be held to be a 'dealer' in respect of such business, then the transactions connected with or ancillary to such business, though in the nature of sale, will not make the person concerned a 'dealer'.

7. As already observed, in the instant case, the assessee has not ceased to carry on its business of manufacture and sale of strawboards. The old plant and its accessories were acquired by the assessee for that business, and therefore, though sale of plants and their accessories is not the business of the assessee, the transaction of sale of an old plant and its accessories is covered by the enlarged definition of 'business' under the Act and such transaction has taken place in the course of the main business of the assessee. In our opinion therefore, the sale transactions in question are exigible to tax.

From the fore-extracted excerpt, it is transparently clear that the ratio of the Ratlam Strawboard Mills' case 1983 Cur TJ 78 squarely applies to the instant case.

13. We now turn to the consideration of Synthetics Limited's case [1982] 49 STC 22. The facts of this case are quite distinguishable from the facts of the instant case. There, the question was :

Whether, under the facts and circumstances of the case, the Tribunal was justified in setting aside the purchase tax imposed on the purchases of building materials by M/s. Synthetics Ltd., Ujjain

and while deciding this question, it was held that since the business itself had not commenced and as such the purchase of material for the construction of the building in which the factory was to be established could not be held to be in connection with the business as the factory machinery could be installed and the factory could be established even in a rented building. Thus, without going into the debate whether the view taken is in line on the matter of law with the view that we are taking and even taken in the Ratlam Strawboard Mills' case [1984] 55 STC 194; 1983 Cur TJ 78, it would suffice to say that Synthetics Limited's case [1982] 49 STC 22 is distinguishable from the facts of the case on hand, and therefore, it cannot be pressed into service and it does not advance the contention of the assessee. The relevant excerpts from the above decision are as under:

In the present case, admittedly the assessee had not commenced its business of manufacture of synthetic yarn, Therefore, purchases of bricks and other building materials before commencement of the business could not be considered as purchases 'in the course of business'.

** ** **The transaction contemplated by Clause (ii) of Section 2(bb) of the Act must have a direct nexus with the business in question which in the instant case was manufacture of synthetic yarn. Construction of a building for installing a manufacturing unit does not have any such direct connection with the business of manufacture of yarn. In fact, construction of a factory building may not be necessary for starting a manufacturing unit. A building can be obtained on rent also for the same purpose. Thus, construction of the building and the manufacturing activity have no direct connection. Therefore, purchasing of building materials for constructing a factory could not be considered as a transaction in connection with, or incidental or ancillary to, the business of the assessee of manufacture of synthetic yarn.

** ** **In the instant case, as the business had not yet commenced, the building materials were not purchased in the course of the business. Secondly, these purchases could not constitute transactions connected with or ancillary to the business of the assessee.

14. In the light of the foregoing discussion, in our decision, the sum of Rs. 5,866 is exigible to tax as the transaction of selling of the articles in question fell within the scope of the term 'business' as defined in Section 2(bb)(ii) of the Act, extracted hereinabove.

15. In the result, the question referred is answered in the affirmative- that is-in favour of the department and against the assessee.

16. The reference is answered accordingly. In the circumstances of the case, we make no order as to costs.